Karachi Stock Exchange Weekly Analysis 16 February, 2015

The Karachi Stock Exchange (KSE) market has taken First negative return in 7 weeks. KSE-100 index closed on 33,943 by losing -714 points or -2.06% while KSE-30 index closed on 21,996 by losing -494 points or -2.19%.

With result season yet to pick pace, we expect improved performance going forward may set the stage for a market rebound next week. Prominent companies announcing results in the week ahead include HUBC (Feb 16), ENGRO, DGKC and HBL (all three on Feb 17) and PSO (Feb 19). While PSO could disappoint on possible hefty inventory losses, others can potentially post +ve surprises. In this regard, we would look to add positions in the coming week where broad-brush political & macro backdrop remains supportive of valuation rerating.

According to experts of http://www.karachistockexchange.org, following news have played vital role in Karachi Stock Market index movement:

  • No doubt with oil prices declining towards lower levels, the cost of production may witness considerable reduction, but so far the corporate results for the last quarter of the calendar may not be impacted by the energy cost deceleration
  • Weekly SPI inflation down by 0.27 percent
  • Lower-priced drugs allowed increase
  • Plan to increase textile exports
  • Immovable property: government seeks to consolidate reduced tax, duties into one percent tax
  • 0.4 million tons consumption: January petrol sales hit record high
  • Sell-off plan: PIA operations likely to hit a snag
  • Local production of LPG becomes unviable due to high price'
  • TAPI project likely to be launched in two months
  • Despite positive news flow during the week, incoming results played their part in the sell‐off with Index heavyweight E&P sector and Telecoms (PTC) posting disappointing earnings
  • Jan’15 trade deficit contracted by 41%MoM/51%YoY to ~US$1bn vs. US$2bn avg. monthly deficit in the last 6 months
  • Increase in remittances by 14.6%YoY to US$10.4bn in 7MFY15
  • Locally manufactured auto sales came in at 17,633 units in Jan’15 (+29%YoY), the highest figure for Jan on record with INDU/HCAR posting record high monthly sales
  • Successful completion of the IMF sixth review leading to the release of $518mn tranche
  • Government of Pakistan enhancing regulatory duty on imported luxury, essential items, furnace oil and metal scrap
  • Government of Pakistan announcing Textile Policy (2014‐19), envisaging to double textiles exports from the current level of $13bn to $26bn over the next five years
  • Government of Pakistan will borrow PKR625bn from the banking system in April, an amount which is more than 100% higher than its March target, revealed an official document on Tuesday, as it is to bridge the gap between revenue and expenditures
  • Number of valuable entities declared their financial results in the outgoing weeks with EFERT outdoing the majority of the companies with exceptional payout, Nevertheless news or rumors about the plant shutdown and secondary public offering pushed the stock lower. ABL’s result was quite unexpected with provisioning charge increasing substantially, denting the overall income. The results related to Cherat Group can be considered as impressive, when compared to the stocks price it seems fairly valued. The result of index heavy weight OGDC in the outgoing quarter was fairly lower than anticipated and as a result the E&P sector swallowed the brunt
  • Coal prices in the international market have come down to nearly USD64‐66/ton, which is likely to reduce the cost of production for the cement manufacturers while at the same domestic retention prices remain stable
  • NBP was the highest lender with PKR5.3bn provided to the power sector. FM has provided a sovereign guarantee in respect of a syndicated term finance facility of PKR25bn. HBL participated in the financing with PKR3.390bn and UBL with PKR3.626bn. ABL provided PKR5bn and MCBPKR3bn
  • Engro Fertilizers Karachi‐based EFL is planning new investments and it develops plans to extend its production outside Pakistan in the Middle East and beyond, as the country is experiencing its worst energy crisis in decades due to a continued decline in gas production
  • SBP injected PKR43.7bn in the market through a four‐day open market operation. The central bank offered PKR43.7bn and the banks accepted the entire offer against a rate of return of 8.25%
  • The ECC also approved the long standing “Drug Pricing Policy”. Effective July 1, 2016, annual increase in drug prices shall be linked with CPI of the immediately preceding financial year. Manufacturers and importers could increase their existing maximum retail prices of scheduled drugs up to 50% of CPI (with a cap of 4%) and that of non‐schedule drugs up to 70% of CPI (with a cap of 6%) once in any FY
  • Iran has offered 3,000MW electricity to Pakistan, in addition to 1,100MW for which the previous government had signed an agreement (100MW) and a MoU (1,000MW), and invited of the MoWP to visit Iran in the third week of the current month to firm things up
  • China, Iran and India are said to have offered 6500MW electricity to Islamabad to help it fight off a projected 8500 MW shortfall this summer
  • Power sector receivables cross PKR590bn mark
  • 125mmcfd of LNG to be allocated to CNG outlets in Punjab
  • The Cabinet Committee on Privatization (CCoP) has approved the transaction structure for divestment of government’s 42% stake (609mn shares) in Habib Bank Ltd, country’s largest bank by assets/deposit

Top gainers of last week were: Atlas Honda Limited, Jah.Sidd. Co., Mari Petroleum, Stand.Chart.Bank, Avanceon Ltd, Allied Rental Mod, Pak Tobacco Co, Pakistan Cables, Bata (Pak) Ltd. and Shezan International Ltd.

Top losers of last week were: Pak Services, Jubilee Gen Ins, Hum Network Ltd, Cherat Cement, IGI Insurance, Muree Brewery Co Ltd, Pace (Pak) Ltd., Lotte Chemical Pakistan Ltd, NIB Bank and Pakgen Power Ltd.

Top ten volume leaders: JSCL, MLCF, EFERT, ENGRO, FCCL, KEL, TRG, DGKC, HUMNL, AKBL, and BOP.

Following are few BUY recommendations:

Fatima Fertilizer (FATIMA) - BUY
Current Price: PKR 37.9
Target Price: PKR 51.7

Oil & Gas Development Co. (OGDC) – BUY
Current Price: PKR 211.2
Target Price: PKR 284.00

Pak Oilfields (POL) – BUY
Current Price: PKR 379.9
Target Price: PKR 442.00

Nishat Mills (NML) - BUY
Current Price: PKR 128.0
Target Price: PKR 163.5

Allied Bank Limited (ABL) – BUY
Current Price: PKR 109.9
Target Price: PKR 140.0 

United Bank Ltd (UBL) – BUY
Current Price: PKR 172.0
Target Price: PKR 210.0

Kot Addu Power Co (KAPCO) – BUY
Current Price: PKR 80.54
Target Price: PKR 97.0 

Pakistan Petroleum (PPL) – BUY
Current Price: PKR 172.11
Target Price: PKR 221.00

Attock Petroleum (APL) - BUY
Current Price: PKR 540.00
Target Price: PKR 626.00

Habib Bank Limited (HBL) – BUY
Current Price: PKR 201.84
Target Price: PKR 262.00

Bank Al-Falah (BAFL) – BUY
Current Price: PKR 31.98
Target Price: PKR 39

Bank Al-Habib (BAHL) – BUY
Current Price: PKR 49.78
Target Price: PKR 68.00

Cherat Cement (MLCF) - BUY
Current Price: PKR 80.53
Target Price: PKR 95.00 

Following are few SELL recommendations:

Hub Power Co (HUBCO) – SELL
Current Price: PKR 85.63
Target Price: PKR 71.00

Nishat Power Ltd (NPL) – SELL
Current Price: PKR 45.49
Target Price: PKR 38.00

Pakgen Power Ltd. (PKGP) – SELL
Current hn6Price: PKR 32.19
Target Price: PKR 24.00

National Bank (NBP) – SELL
Current Price: PKR 67.22
Target Price: PKR 53.00

Thank you very much for reading this article.

NOTE: The information posted in this blog /forum (http://www.karachistockexchange.org/) is based on current affairs & investors point of view. There may be discrepancy in the ground realities.

Written by: Rana Khurram

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